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LONDON (Alliance News) - The FTSE 100 and FTSE 250 moved in opposite directions Tuesday, as London's major stocks indices closed mixed, driven by some big moves by individual stocks.
The UK's blue-chip index closed at its lowest level for almost two weeks, as it was weighed upon by some of its key constituents.
Vodafone, which is the sixth largest company in the FTSE 100 by market capitalisation, was the biggest faller in the index Tuesday, ending the day down 5.8%.
The wireless company's attempt to appease investors with the promise of higher dividends was not enough to prevent it from closing firmly lower after it warned that its cash flow would be hit by its huge investment programme in the next few years, and it reported falling service revenue due to continued weakness in some of its European markets.
The group reported revenue GBP38.35 billion on a statutory basis, up from GBP38.04 billion, although fell to GBP43.62 billion, from GBP44.45 billion, when contributions from joint ventures are consolidated proportionally. On that basis, Vodafone's preferred measure, its service revenue fell 4.3% in the full year and 3.8% in the fourth quarter.
Looking ahead, the company, which is going through a major transformation after selling its stake in Verizon Wireless late last year, said it is planning to make about GBP19 billion of investments over the next two years.
"While cash flow will be depressed during this investment phase, our intention to continue to grow dividends per share annually demonstrates our confidence in strong future cash flow generation," Vodafone Chief Executive Vittorio Colao said.
Marks & Spencer Group, closing down 1.1% also provided a drag on the index. The retailer's shares fell sharply after it posted its third consecutive annual drop in a closely-watched profit measure, and said it remained cautious about the outlook for the business due to competition and promotional pricing in the UK retail sector.
Underlying pretax profit, which strips out exceptional items and fair value movements, fell to GBP623 million for the 52 weeks ended March 29, from GBP648.1 million; slightly above analyst expectations for up to GBP620 million.
The retailer has now come to the end of a three-year plan to turnaround the business. However, it has failed to turnaround its general merchandise business despite the success of its food offering.
Meanwhile, Paragon Group of Companies, closing up 9.6%, helped lift the FTSE 250 Tuesday.
The specialist lender reported a 19% increase in first-half pretax profit, supported by buy-to-let lending and its debt purchase business Idem Capital. It said it made a GBP58.2 million pretax profit in the six months to end-March, compared with GBP48.8 million in the corresponding period a year earlier.
Homeserve, closing up 7.3%, was another big mid-cap riser. Shares in the home emergency company rose despite reporting a significant drop in full-year pretax profit due to the GBP30.6 million fine that it was handed by UK regulators in February for mis-selling insurance policies to its customers offsetting higher revenue.
However, the results were broadly in line with consensus expectations and management have indicated that they will review the capital structure, "which may result in an increased dividend, special dividend or share buy-back, said Liberum Capital analyst Joe Brent.
Overall, the FTSE 100 closed down 0.6% at 6,802, its lowest closing level since May 7, the FTSE 250 closed up 0.4% at 15,440.25, and the AIM All-Share index closed down 0.2% at 789.53.
Carnival, closing up 3.4%, was the biggest riser in the FTSE 100. Shares in the group rose after it said it would add two ships to its Australian fleet in 2015 to meet surging demand for cruises in the country. It said Australian cruise passenger numbers have more than doubled in the past five years and are projected to grow to one million by 2016, from 800,000 in 2013.
ITV was another big riser, ending the day up 2.2%, after Berenberg upgraded the company to Hold from Sell, reflecting its acquisition of US entertainment group Leftfield and following the sharp sell-off the stock has suffered since the broadcaster released its first-quarter results.
ITV shares closed Monday more than 8% cheaper than they were a week ago before release of the latest numbers, and Berenberg said it is now more comfortable with the valuation.
Afren was the biggest faller in the FTSE 250, closing down 5.7%. The oil and gas exploration and production company reported a drop in profits for the first quarter as revenue fell sharply.
It posted a pretax profit of USD55.8 million for the three months to end-March, down from GBP138.8 million a year earlier, on the back of a 30% drop in revenues and higher finance costs. Revenue in the quarter fell to USD269 million, down from USD386 million a year earlier, which it said was due to a reduced share of production and liftings from the Ebok field, in which it has a 50% working interest, following cost recovery.
In Europe, the CAC 40 in Paris and DAX 30 in Frankfurt closed down 0.4% and 0.2%, respectively.
It is a similar story on Wall Street. At the UK equity market close, the DJIA is down 0.2%, the S&P 500 is down 0.2%, and the NASDAQ Composite is down 0.3%.
In the forex market, the pound jumped to a four-day high against the dollar after UK inflation data showed prices rising faster than expected, before quickly returning close to pre-announcement levels.
UK consumer price inflation came in at 1.8% year-on-year in April, up from the four-and-a-half low of 1.6% that it dipped to in March, and exceeding economists expectations for a growth rate of 1.7%. On a monthly basis, prices rose at 0.4% in April, slightly faster than the 0.3% expected.
"This doesn?t really change too much from the central bank?s perspective, they remain under no pressure to tighten monetary policy any sooner than they believe the economy can take and, unlike the eurozone, there is no apparent threat of persistently low inflation," said Craig Erlam, a market analyst at Alpari.
"This is just a further sign that the UK economy is recovering and prices are picking up at the desired rate. All we need now is wage rises to surpass, or at least hit, this level and the future will look very bright for the UK," Erlam says.
Last month, the dip in CPI to 1.6% put it just behind the most recent wage growth rate, including bonuses, of 1.7%, which was met with a lot of positivity as it suggested the return of real wage growth to the UK economy. However, this latest up-tick in inflation erodes any such wage growth.
"This wasn't entirely unexpected, and the expectation is that it is likely to be a temporary blip, given that factory gate prices continue to remain weak, which should keep prices throughout the supply chain on the low side," said Michael Hewson, chief market analyst at CMC Markets.
The latest house price data, released from the Office for National Statistics along with the inflation numbers may also reduce pressure on the Bank of England. The Department for Communities and Local Government house price index rose by 8.0% year-on-year in April, slowing from 9.1% in March and coming in considerably behind the 10.7% growth that had been predicted.
While the Bank of England governor has been explicit that house prices are a matter for the Prudential Regulation Authority rather than the Monetary Policy Committee, he has also said that their rapid acceleration poses the single greatest threat to the UK economic recovery.
At the close of the UK equity markets, sterling trades at USD1.6840, EUR1.2295, CHF1.5024, and JPY170.54.
Still to come Tuesday, US Philadelphia Federal Reserve President Charles Plosser gives a speech at 1630 GMT, followed by New York Fed President William Dudley at 1700 GMT. UK Monetary Policy Committee member Charlie Bean also is due to talk after the UK market close at 1730 GMT.
In the data calendar Wednesday, the Bank of Japan releases its latest interest rate decision and monetary policy statement at 0300 GMT. Current account data for the eurozone are published at 0800 GMT, shortly before the Bank of England releases the minutes from its latest interest rate decision at 0830 GMT, with UK retail sales data for April released at the same time
Later on, the Mortgage Bankers Association releases its MBA mortgage applications data 1100 GMT, ahead of the preliminary reading of eurozone consumer confidence at 1400 GMT.
Federal Reserve Chair Janet Yellen gives a speech at 1500 GMT, with the President of the Federal Reserve Bank of Kansas City Esther George speaking at 1650 GMT, and Minneapolis Federal Reserve President Narayana Kocherlakota speaking at 1730 GMT.
The US Federal Open Market Committee releases the minutes from its April meeting at 1800 GMT.
In the corporate calendar, FTSE 100-listed SSE and Burberry Group are joined by FTSE 250-constituents Great Portland Estates, DCC, Cable and Wireless Communications, HICL Infrastructure Company, FirstGroup, and Telecom Plus in releasing full-year results on Wednesday.
By James Kemp; jameskemp@alliancenews.com; @jamespkemp
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